US-CHINA: Commerce Min Wang: US & China 'Must Coexist & Safeguard Trade'

The DMO has announced it will be looking to sell GBP1.5bln of the 1.125% Sep-35 linker (ISIN: GB00BT7HZZ68) at its auction next Tuesday, October 28.

As we noted previously, the standout takeaway from the September CPI report was in the stubborn trim/median average failing to decelerate in the month as expected. Various core metrics were also largely sequentially steady/higher. None appeared to be game-changers in terms of the overall consensus narrative of gradual disinflation from the summer's highs but nonetheless ensured the report carried a slightly hawkish tone overall with continued evidence that prices may be a little sticker than hoped. 

• We note however that core goods inflation is moderating with core services merely a little stickier, and it's  been largely food/energy inflation and downstream effects thereof that spurred the tickup in overall CPI. This should temper the BOC's concern over the overall report as it considers an October rate cut.
• Headline CPI jumped a little more than expected, with the 2.36% Y/Y unrounded a little higher than the MNI median 2.3% and marking a sizeable jump from 1.85% prior for a 7-month high. The M/M figure of 0.06% (NSA) was likewise above the 0.0% median, and up from -0.06% prior.
• The seasonally-adjusted M/M headline reading of 0.43% was an acceleration from 0.18% prior but actually was merely in line with the MNI median of 0.4% (albeit in a limited sample of analysts) despite the higher headline figure.
• The main factor behind the slightly higher than anticipated headline figures is energy: it dragged down CPI with a -2.6% Y/Y reading but this was the first non-double-digit drag since March before the elimination of the consumer carbon tax (prior was -8.6%).
• While energy prices tend to be volatile, one headline category standout for the BOC will be food prices: they rose 2.8% Y/Y in September, up from 3.4% in August.
• Grocery prices, the largest subcategory and 11% of CPI, hit a 21-month high 4.0% (3.5% prior), in one of the categories that had been seen as impacted by the retaliatory tariffs imposed on US imports which ended at the start of the month.
• Suggestive of food being a major driver of overall inflation: excluding food, overall CPI was 2.1% Y/Y, the first figure above 2% since March but still  fairly tame. Excluding groceries and energy, inflation actually ticked down to 1.6% Y/y from 1.7%, for a 5-month low.

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